So, what’s the difference?
You already know what the typical townhouse and condo physically look like. And 90% of the time you know what it is when you see it. But it’s the other 10% that can get you in trouble. In Austin, the last 10 years it’s even more common for builders in downtown areas to split a lot in half with a two unit condo complex versus a two unit townhome. This is because the building permit process is much faster to build condos because the land does not need to be re-deeded since its still one owner of the land, the HOA, vs. two or more with a townhouse complex.
NOTE: being listed as a condo can mark a big difference when you look for a mortgage on a property like this as lending standards are stricter on condos.
The only way to tell the difference is by checking the legal documents that show exactly how it was defined when it was built. The restrictive covenants will state whether it is a townhouse or a condo. Usually, the closing attorney will pull a copy of these when they do their title search but, that may be a day before closing and you need insurance prepared well in advance. So, you may want to call the homeowners association president to get a copy or verification. Don’t trust the seller! They could have been mis-informed when they bought it.
NOTE: you can call your HOA and ask them if there is a master policy for the outside walls; If they say yes, then you live in a condo.
What’s the big deal? Condos and townhouses are insured by two different kinds of policies.
Since a condo owner only owns the space within the unit and its contents, that’s all a condo policy covers. The association’s master policy covers the walls, roof, and sometimes the deck, porch, etc.. And most condo association policies cover the interior cabinets and floor coverings as they were originally installed. There could be a problem if a unit has been upgraded from the original. Most times, the association policy will not cover any upgrades in cabinets, light fixtures, etc.. The buyer will have to increase this coverage. It’s called “alterations and improvements” coverage.
A townhouse is insured with a standard homeowners policy, just like a single family home. Since the townhouse owner owns everything from the ground up, they must be insured from the ground up, including the walls, roof, contents, lights, cabinets, etc..